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Digging for Gold - Winning in Transaction Banking

At the recent NEACH Payments Insights conference it was interesting to find an audience gripped by two strong emotions – excitement and fear. The excitement was about new opportunities in transaction banking and how the emerging generation of customer will drive change. And the fear? Disintermediation by fierce competition from new market entrants. Those young technology-based companies that seem to be able to change the game in an instant.


Banks are known for their clunky legacy environments – so it’s really not hard to imagine a nimble, non-bank competitor being able to swoop in and eat their lunch. It’s already happening in the retail payments space with organisations such as PayPal and BillMeLater. So it is only a matter of time before the corporate side gets caught up.


The need to appeal to the next generation of customers - the connected-up, internet generation that expects information to be available in an intuitive, collaborative way – can be a key driver of innovation in payments services. On the corporate side, there is still plenty of opportunity for banks to do payments best - to win and retain clients and really shut out new competition.


How? By leveraging their data.


A report from Gartner came to the conclusion that banks will begin to drive new revenue streams from payment information in the form of value-added services. And, in their words, the ability to leverage data is going to be THE differentiator. Investing in payments systems can no longer be just a strategy to reduce costs through automation. The goal of the newest payment systems has to be to add value to the user experience and this can be done by extracting important data that usually resides hidden deep in the back-office.


The challenge then for financial institutions is how to get their hands on this data and deliver it in a simple and timely manner to the customer.  And ideally not just mine the existing internal data, but acquire new forms of client data from services like Electronic Invoice Presentment, and throughout the financial supply chain. The goal is to be in the middle of the flow of data surrounding these transactions.


Using this data to create innovative services will help banks anchor themselves at the heart of these transactions and make it very difficult for new competitors to march in. And SOA technology is the enabler that will get banks up and running quickly, removing traditional legacy constraints.


By focusing on the transaction data that already exists within the bank and adding new forms of data from EIPP, forward thinking banks will be able to not only create new valuable services, they will also differentiate themselves from the competition – both bank and non-bank. It’s as if banks were sitting on a goldmine – if they only started digging.


Comments: (3)

Alexander De Lange
Alexander De Lange - Aurelia Financial Consultants cc - Johannesburg 18 November, 2009, 04:12Be the first to give this comment the thumbs up 0 likes

George: I could not agree more, data intelligence is the key to competitive differentiation and future business success, and certainly not only in transaction banking, although that seems to be one of the lesser explored areas in this regard.

A drum worth continuing being beaten!

A Finextra member
A Finextra member 19 November, 2009, 01:59Be the first to give this comment the thumbs up 0 likes

I agree with the premise of your comments.  With some smarter colleagues back in 2002 we saw the potential value in the data the bank had access to, couldaggregate and re-sell.  However the mindset of too many people in banks is on products and specifically those that 'action' value.

The part I disagree with is the bank being in the "middle of the flow of data".  Corporates don't want banks intermediating, they are looking to us to participate.  As such the bank should sit alongside the supply chain, participating when appropriate, but using the end-to-end visibility it can achieve to develop a helicopter view.  This view would faciliate new services around data, risk management and transaction services.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 19 November, 2009, 08:27Be the first to give this comment the thumbs up 0 likes

As a technology partner to various banks and having participated in many steering committees of transaction banking businesses of leading banks, I'm inclined to agree with Geoff's views.

There's a whole lot of 'product' mindset in banks, which is very good to keep the 'lights on', but creating new revenue streams from transaction banking data calls for a 'solution' mindset.  

I have come across a relationship manager at a Top 5 UK bank sensing strong potental to earn incremental revenues by offering hourly account balance insight to their corporate clients. But, they have been shooed away by their operations and IT citing that too much change would be required to their existing systems to fulfill this need. Can't say I blame the ops or IT departments because their first priority is to keep the shop running smoothly, so it's not hard to understand their "why fix it if ain't broken" attitudes.

I think this impasse can be broken by technology vendors partnering with transaction banking businesses of banks in order to create point solutions and taking them to market jointly.



George Ravich

George Ravich


Ravco Marketing, LLC

Member since

20 Jan 2008



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